Tallant Technologies Is Considering Two Potential Projects, X and Y

question 74

Multiple Choice

Tallant Technologies is considering two potential projects, X and Y. In assessing the projects' risks, the company estimated the beta of each project versus both the company's other assets and the stock market, and it also conducted thorough scenario and simulation analyses. This research produced the following data: $\begin{array}{lrr}& \text { Project X }& \text { Project Y } \\\text { Expected NPV } & \$ 500,000 & \$ 500,000 \\\text { Standard deviation (oNPV) } & \$ 200,000 & \$ 250,000 \\\text { Project beta (vs. market) }& 1.4 & 0.8\end{array}$
Correlation of the project cash flows with cash flows from currently existing projects. Cash flows are not correlated with the cash flows from existing projects. Cash flows are highly correlated with the cash flows from existing projects.σσWhich of the following statements is CORRECT?

• A) project x has more corporate (or within-firm) risk than project y.
• B) project x has more market risk than project y.
• C) project x has the same level of corporate risk as project y.
• D) project x has less market risk than project y.
• E) project x has more stand-alone risk than project y.

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Definitions:

Inequality

The state of being unequal, particularly in terms of rights, status, or opportunities among different groups of people.

Veil of Ignorance

A concept in moral and political philosophy that suggests making decisions with a hypothetical lack of information about one's status or position in society to ensure fairness.

Original Position

A hypothetical scenario used in political philosophy, particularly by John Rawls, to establish principles of justice that are chosen by individuals under a veil of ignorance, without knowledge of their place in society.

Talents and Abilities

Refer to the natural aptitudes and learned skills that individuals possess, which can vary widely between different people.